POLITICS

Deputies have approved the Offshore Law on the Black Sea gas exploitations

On Wednesday, the Deputies’ Chamber voted, as the decisional body, with 170 pros, 3 cons and one abstention, the Offshore Law on the conditions under which the Black Sea gas exploitation can be performed. The investors are obliged to trade 50% of the gas on the Romanian stock exchange, and 25% of their employees must be Romanians.

The Offshore Law was approved by the Deputies Chamber as the decisional body, with 170 pros, 3 cons and one abstention.

On Wednesday, the Deputies’ Chamber adopted an amendment to the Offshore Law belonging to PNL, according to which the holders of the oil agreements are subject to the tax regime that is specific to the exploration, development and abandonment activities carried out based on the existing agreements.

“Art. 18, par.1: The holders of the oil agreements related to the offshore oil perimeters which are ongoing at the date of the entry into force of this law, will be subject, throughout the implementation period of these agreements, to the royalty level, oil royalty percentages, gross production thresholds corresponding to these percentages, and tax regime applicable to the exploration, development and abandonment activities carried out based on the existing agreements on the date of the entry into force of this law”, provides the PNL amendment voted by the Deputies’ Chamber.

PNL MP Virgil Popescu mentioned that it concerns a principle about PNL cares very much, for which reason “it is not negotiable”, since this principle is the principle of stability and predictability.

On Tuesday, the joint Industry, Public Administration and Budget Committees of the Deputies’ Chamber adopted a favorable report with amendments for the draft law on certain measures which are necessary for the implementation of the oil operations by the holders of oil agreements related to oil offshore perimeters.

“We have not abdicated, and I am glad that there are some standing principles, I am talking about the percentage of 50% of the gas production traded on the Romanian stock exchange, the calculation with a 30% deduction from the additional income tax remained, so that when we draw the line, the Romanian state and the investors will have a balanced gain. Romanian state and investors are equitably sharing the profit of the Black Sea gas. We have accepted that the gas belongs to us, the Romanian state, and technology belongs to them, and we have accepted, and it’s a natural thing for investors to deduct their investments”, stated on Tuesday, at the end of the meeting, the President of the PSD Group in the Deputies’ Chamber, Daniel Suciu.

Referring to the profits that the Romanian state and the investors will gain as a result of implementing the Offshore Law, the ALDE Vice Chairman Varujan Vosganian said on Tuesday that according to the assessments, the report is “50/50, with certain oscillations”.

“The point around which all the assessments are made is 50/50, of course, with certain oscillations, depending on the scenarios and assumptions each of us has. But we appreciate that notwithstanding the assessment on the commercial agreement itself, we must add other elements too, such as VAT, other fees and taxes and contribution to the budget, then the fees deriving from the gas pipeline flows, the effects in the horizontal industry, therefore the effects of this law will be beneficial to the Romanian state”, Vosganian pointed out.

Regarding the fees applied to the companies by the Romanian state, the draft states that “The holders of the oil agreements related to the offshore oil perimeters which are ongoing at the date of the entry into force of this law, will benefit, throughout the implementation period of these agreements, from the royalty level, oil royalty percentages, gross production thresholds corresponding to the existing percentage on the date of the entry into force of this law”, according to the text of the law that was sent to the plenum of the Deputies’ Chamber for the final vote.

Also, the holders of oil agreements related to offshore oil perimeters, including their branches and/or belonging to the same group of economic interest which actually carry out both extraction activities and activities related to selling natural gas extracted from these perimeters, must calculate, declare and pay the tax on the offshore additional income.

“Additional income means the difference between the weighted average price of the natural gas sold from the own domestic production from the offshore perimeters, and the purchasing price of the natural gas from the domestic production for the household and non-household customers in 2012, respectively RON 45.71/MWh, multiplied with the volume of gas sold from the domestic production from the offshore perimeters”, according to the law.

The tax on the offshore additional income is calculated by applying one or more calculation percentages, as the case may be, to the additional income gained from selling the natural gas extracted from the offshore perimeters; the amount of the investments in the upstream segment is deducted from this tax. The tax on the offshore additional income takes into account the reference price established by ANRM for the calculation of the royalties. Transactions below the reference price are subject to the tax applied to the reference price.

“The percentages for the calculation of the tax are calculated based on the selling price of the natural gas practiced by the holders of the oil agreements related to the offshore oil perimeters based on the price grid from below, adjusted annually starting from January 1, 2019, to the annual index of the consumer price, as follows:

  1. a) 30% of the additional income for the prices up to RON 85/MWh inclusive;
  2. b) 15% of the additional income gained as a result of practicing higher prices than RON 85/MWh and lower or equal to RON 100/MWh;
  3. c) 30% of the additional income gained as a result of practicing higher prices than RON 100/MWh and lower or equal to RON 115/MWh;
  4. d) 35% of the additional income gained as a result of practicing higher prices than RON 115/MWh and lower or equal to RON 130/MWh;
  5. e) 40% of the additional income gained as a result of practicing higher prices than RON 130/MWh and lower or equal to RON 145/MWh;
  6. f) 50% of the additional income gained as a result of practicing higher prices than RON 145/MWh and lower or equal to RON 160/MWh;
  7. g) 55% of the additional income gained as a result of practicing higher prices than RON 160/MWh and lower or equal to RON 175/MWh;
  8. h) 60% of the additional income gained as a result of practicing higher prices than RON 175/MWh and lower or equal to RON 190/MWh;
  9. i) 70% of the additional income gained as a result of practicing higher prices than RON 190/MWh”, the draft provides.

The maximum limit to deduct the investments in the upstream segment cannot exceed 30% of the total tax on the offshore additional income, according to the draft law.

Also, the amount owed by the holders of the oil agreements related to the offshore perimeters as tax on the additional income are collected into an account which is used especially for expanding the natural gas distribution networks and the connections to the natural gas transmission national system, as well as for funding other investments established by the Government’s Decision. Distributing the collected amounts is done by the Government’s Decision. Collecting the tax on the additional income is administered by the National Agency for Fiscal Administration.

Investments taken into account to be deducted from the tax on the additional income cannot be subject to other deductions, the draft Offshore Law also provides. Also, investments taken into account to be deducted from the tax on the additional income are not considered for the calculation of the fiscal result of the corporate income tax payment periods, in the sense that no tax reductions/exemptions or cost deductions are accepted for them, since they are deemed non-deductible for the calculation of the corporate income tax.

Another provision is related to the fact that starting from the date of entering into force of the law, the holders of oil agreements related to offshore oil perimeters “are obliged to conclude contracts on the centralized markets by a transparent, public and non-discriminatory manner, in the calendar year in which they deliver natural gas, to the extent to which they sell natural gas on the wholesale market, according to the regulations issued by the National Regulatory Authority in the Energy Field, hereinafter referred to as ANRE, for the sale of a minimum quantity of natural gas which cannot be lower than the one represented by 50% of the natural gas production from their own production, whose delivery is contracted for that calendar year, as the seller. The natural gas quantity contracted on the centralized markets by a transparent, public and non-discriminatory manner, is sold based on a procedure approved by ANRE, so that the buyers of the natural gas cannot be conditioned to buy a minimum quantity imposed by the seller”.

The initial duration of the concession can be up to 30 years, with the possibility to extend it by 15 more years through the Government’s Decision, upon the request of the holder of the oil agreement related to the offshore oil perimeters, provided that he will fully fulfil the works programs established by ANRM through the oil agreement, the law also states.

On Tuesday, the joint Industry, Public Administration and Budget Committees of the Deputies’ Chamber approved the amendments to the draft Offshore Law, so that the protection area in case of archeological discoveries was reduced from 200 meters to 50 meters.

Another amendment introduced on Tuesday provides that the companies will be obliged to file a statement by which they assume the payment of the repair works for possible damages on the environment. According to the draft Offshore Law, the holders of the oil agreements must submit a “documentation” to the Energy Ministry, which will be attached to the request for issuing the permit for offshore works. Without this documentation, the Energy Ministry cannot issue the permit on the offshore works. On Tuesday, the specialized Committees of the Deputies’ Chamber adopted an amendment providing that the mandatory documentation to be submitted by the investors must include also the “Statement of the Holder of the Oil Agreement on Bearing the Costs of the Repair Works for the Damages Caused to the Environment”. The PSD-ALDE parliamentary groups, which initiated the amendment, say that the measure “is justified I case of a dispute”.

Related posts

Antimissile shield will ‘protect Europe from Russian blackmail’

Nine O' Clock

Diaconescu hopeful that Hillary Clinton would come to Bucharest

Nine O' Clock

Scenes from a famous soap opera will be cast in the Parliament Palace

Nine O' Clock

Leave a Comment